Buying Your First Home
Purchasing your first home is an exciting experience but it can also be daunting. There are a lot of things you need to know when you’re looking to make that first step on the housing ladder. Below is a brief guide for first home buyers looking to enter into the property market.
So you’ve found a property you are interested in – what’s next?
In this current market, it’s tempting to put an offer in on a property as soon as you have walked into that first open home but there are a few things you should look at before signing your first agreement.
The first thing to consider is your budget. The Reserve Bank may soon impose debt to income ratios, limiting the amount someone can borrow so before you sign any agreement, it is a good idea to speak to your bank or a mortgage broker to see what you can afford. Your Bank will generally require you to have at least a 20% deposit which can be made up of personal savings, your Kiwisaver (provided you have been a contributing member for at least three years) and depending on price and location of the property, you may qualify for the First Home Grant. This grant can be up to $10,000 per applicant. It is important to be realistic about the amount you can afford while also taking into consideration how much the vendor is expecting to get for their property.
It’s important to know exactly what type of property you are buying, In New Zealand there are four main types of property, these are:
- Freehold also known as Fee Simple;
- Cross Lease;
- Unit Title; and
Therefore, before you put your offer in or during your due diligence, it is a good idea to review the record of title to the property to ascertain what restrictions or interests you should be aware of. For example, while a property may be freehold, it could be subject to easements and covenants, among other interests, that may impose obligations on you as the property owner or restrict any plans you may have for the property.
What kinds of conditions should you include in your offer?
Not many first home buyers can put in a cash unconditional offer, and we generally wouldn’t recommend it. As this may be one of the biggest investments of your life, you will want to ensure you complete your due diligence on the property. We can prepare your offer to the vendor of the property or review an offer prepared by a real estate agent before you sign. A few of the most common conditions included in agreements are as follows:
- Finance – you might already have pre-approval from your bank but there may be conditions attached to the approval such as a requirement to obtain a registered valuation of the property or a building report, both of which can take a number of days. In addition, if you will be using your Kiwisaver as part of the deposit, you will need to ensure the finance condition is at least 10 to 15 working days so your Kiwisaver provider can process your application and you can complete any checks required by your bank. It is important that you have a confirmed offer of finance before the agreement becomes unconditional.
- Building report – This is a report undertaken by a registered building inspector. They will assess the property and indicate any areas of concern, highlight issues that need to be resolved in the property and give you a better indication of the condition of the property you are looking at purchasing.
- LIM – This is a Land Information Memorandum, a report provided by the local council which will tell you if building works have been consented to, provide information regarding council services to the property (such as sewerage and water) and highlight any possible risks known to the council affecting the property such as flooding or erosion.
We can also recommend bespoke conditions, depending on the type of property and your particular circumstances. We can help look through building reports and LIMs for you and highlight key issues you should be aware of. Should these documents raise issues, we can liaise with the vendor’s solicitor to request they rectify any issues prior to settlement or negotiate a price reduction as a result of any issues the property may have. In an ideal world, your offer would be conditional upon as many conditions as you feel are necessary but it’s no secret the housing market is moving rapidly at the moment so consideration should be given to the number of conditions you put in your offer so you can put your best offer forward.
The vendor will generally leave behind a number of chattels (such as carpets, heat pumps, dishwasher and stoves) in the property, so while you inspect the property it is a good idea to note the conditions of these chattels. If you go unconditional on the property, you will be able to inspect the property again before settlement and check all the chattels are in reasonable working order and in the same condition as you first inspected them.
Once you have an unconditional offer on a property we will prepare all necessary documents and attend to settlement on your behalf. We pride ourselves on assisting first home buyers and making your purchase as stress free as possible.